MCX-SX first to introduce liquidity enhancement scheme

MCX Stock Exchange (MCX-SX) said that it will introduce liquidity enhancement scheme (LES) in equity and equity derivatives segments.

MCX-SX is the first national exchange in India to be offering incentives for liquidity enhancement in the Equity Cash Market. This will be effective from March 6, 2013.

In a aim to invite genuine participation and benefit all participants across various segments of the market - from smallest of retail investors to largest of institutions - for wholesome development of India's Capital Market.

In order to develop the markets at the fundamental level, the Liquidity Enhancement Scheme has been structured to reach out to real investors and users so that the investors and members have the benefit of sustained and genuine liquidity.

MCX-SX said the market maker performing up to 90 per cent of their obligation during the month in 25 securities would be entitled to receive an additional incentive of Rs 21 lakh per month.

In case of 40 securities, the member would be entitled to receive an additional incentive of Rs 50 lakh per month.

"All passive orders will entitle the member/investor to receive about 50 per cent of the transaction cost received by the exchange from the active order," it added.

"Market makers will be obligated to contribute to genuine participation and will be incentivised at a higher rate compared to other participants. Payments to members would be made on a fortnightly basis," MCX-SX said.

Additionally, incentives would be provided for retail clients, dealers and proprietary traders to create a liquid order book based on genuine end users' participation. These incentives are available for a period of four months, from March to June.

All retail investors/clients will be entitled to Rs 100 per day for trading in equity cash and equity derivatives.